Markets to start F&O expiry week on optimistic note

The Indian markets lost their momentum after the initial few hours of trade and just managed a flat closing in the last session, concerned over global political crisis. Today, the start of the F&O series expiry week is likely to be in green, tailing the positive cues from the global markets. Traders will be reacting to the GST Council finalizing for services and sector specific actions can be seen based on the rates allocated. There will be four rates for services at 5, 12, 18 and 28 percent, similar to tax slabs for goods. Healthcare and education will be exempted from GST and stocks related to them can see upmove, while somberness can be seen on Telecom and financial services stocks as they will be taxed at a standard rate of 18 percent. Meanwhile, rating agency ICRA reacting to the rate finalization has said that structure is unlikely to fan inflation, and the Reserve Bank will be “less hawkish” in its stance at June 7 review. Marketmen may get some support with report that Foreign Direct Investment (FDI) inflows into the country touched a new high of $60.08 billion in 2016-17. Inflows grew by 8 per cent over the previous high of $55.6 billion posted in 2015-16. There will be lots of earnings reactions to keep the markets in action for the day.

The US markets extended their gains in last session, as traders continued to pick up stocks at relatively low levels following the substantial weakness seen on Wednesday. Positive sentiment was also generated by comments from St. Louis Federal Reserve President James Bullard raising questions about the need for another increase in interest rates next month. The Asian markets have made a positive start following the continued recovery on Wall Street last week and as investors digest yet another missile test out of North Korea at the weekend.

Back home, Indian equity indices scuttled between gains and losses to finally settle the day on flat note as 2-day GST Council meet ended where rates for various goods and services were decided.  According to many experts, the multi-tiered GST may not be inflationary as far as goods are concerned as 81% of them will be taxed at 18% or less with mass-consumption items at the lower end of the bands. Items like milk, fruit and vegetables, jaggery, food grain and cereals getting exemption from GST, while items like sugar, tea, coffee, edible oil, mithai, and newsprint will attract the lowest GST of 5%. However, those who were planning to buy a new car could be forced pay more after July 1 as most vehicles fall in the higher tax basket. Also, Motorcycles of more than 350 cc engine capacity will attract a total of 31% tax under the GST regime, same as the tax incidence on private aircraft and luxury yachts.  Some product like local made Mobiles phones might also get costlier, with the government imposing a 12% GST, taking away the benefit under duty differential that was being offered to local manufacturers. The session largely remained characterized by choppiness as the aimless indices moved only sideways in a tight band as investors were evaluating the impact of GST on various product and services before adding new positions. The GST rates on telecom, financial services have been fixed at 18%, while healthcare and education were exempted from service tax. Decision is yet to be made on gold, silver and other goods. Adding to the optimism among investors, Union Minister Arjun Ram Meghwal said, the decision to implement GST from this July 1 is one of the important economic reforms and would be a major milestone in the growth of the country. He also said that demonetisation had helped improve the GDP of the country despite apprehensions to the contrary from certain quarters, noting that the growth has gone up and would reach 10%. Meanwhile, Narendra Modi government has set an ambitious target of awarding Rs 5 lakh crore worth of highway contracts, totalling about 50,000 km, in the last two years of its tenure, surpassing the cumulative road length awarded for paying in the last five years. Finally, the BSE Sensex gained 30.13 points or 0.10% to 30464.92, while the CNX Nifty was down by 1.55 points or 0.02% to 9,427.90.